StaFi Foundation Will Allocate 5M FIS Tokens to Bootstrap the Liquidity of rDEX
rDEX is being tested by the community and audited by a professional third party organization, Peckshield. rDEX will officially go live when these audits are completed. To encourage the community to provide liquidity to rToken pairs on rDEX, StaFi Foundation will allocate 5 million FIS (approximately 5% of the total), from the Community Treasury as the total reward pool for the rDEX Liquidity Mining Program.
By the rDEX development plan, the rDEX Liquidity Mining Program will be divided into three phases:
1.Spring Program, with a total reward pool of 2 million FIS.
This phase will be shortly after the official launch of rDEX, and so not all supported rToken pairs will go live immediately. This will happen in a gradual manner. By the time the Spring Program is complete, rDEX will support all rToken/FIS pairs, leading to the accumulation of enough liquidity for the stage.
2.Summer Program, with a total reward pool of 2 million FIS.
During this phase, rDEX will explore different ways of deployment on StaFiHub, in order to support Native Token and FIS trading pairs, such as ATOM/FIS, etc. This will eventually enable trading between rToken and Native Token (FIS as the route token). So most of the mining incentive for the Summer Program will be Native Token/FIS, with rToken/FIS as a supplement.
3.Autumn Program, with a total reward pool of 1 million FIS.
After the first two phases, rDEX will shift to this phase where 1 million FIS will be reserved as a long-term support plan. During this phase, rDEX will explore different ways of supporting community voting, as this will determine the allocation of mining incentives in each transaction to Pool incentives.
The details of the Liquidity Mining Spring Program will be officially announced to the community after rDEX goes live. Until then, we have prepared this article to help the community understand the design of rDEX’s Liquidity Providing mechanism so that they can be prepared in advance. Meanwhile, the community can get a preview of how to participate in liquidity mining through the rDEX Testnet. For more details please read rDEX Testnet Guide.
Trading Pairs
Just after its launch, rDEX will support only transactions between StaFi chain native rToken and native FIS token. So in order to participate in the Spring Program mining incentive, you will need to meet any of the following three conditions:
1.Hold StaFi chain native rToken
Refer to rToken Minting Guide (rETH, rBNB, rFIS, rDOT, rKSM, ATOM, rSOL, rMATIC) for how to acquire StaFi Chain Native rToken.
2.Hold Native FIS token
You can acquire native FIS in several ways.
- Huobi Global exchange supports Native FIS, so you can get Native FIS directly from there.
- Binance only supports ERC-20 FIS, so you can get ERC-20 FIS from there and then convert to native FIS through StaFi’s rBridge;
- Note that native FIS needs to be stored via the Polkadot JS mobile extension wallet. See: How to use Polkadot JS to store native FIS.
3.Hold both StaFi chain native rToken and Native FIS token
Please note that for either of the three conditions, you need a small amount of Native FIS as Gas Fee. If you need a small amount of Native FIS, you can get it through StaFi’s FIS Fee Station. Refer to FIS Fee Station Guide.
Liquidity Providing
Users can deposit 2 Tokens simultaneously on rDEX, or any single one, to provide liquidity. They can participate in rDEX liquidity mining activities in any of the following ways:
1.Deposit only StaFi chain native rToken.
2.Deposit only Native FIS tokens.
3.Deposit both StaFi chain native rToken and Native FIS token in any ratio.
When a user deposits, s/he will receive a LP token as proof of liquidity supporter. The LP token can be transferred or staked to participate in rDEX’s Liquidity Mining Program.
Bonded Liquidity Gauges
When a user obtains LP tokens, s/he needs to deposit them into rDEX Bonded Liquidity Gauge to get Liquidity Mining Rewards. If not, s/he will only receive the trading fees without Liquidity Mining Rewards.
Many liquidity mining programs initiated by DEXes can see a short-term liquidity spike followed by a liquidity crash when liquidity mining ends. So, rDEX-sponsored liquidity mining programs will encourage long-term liquidity even more. To incentivize rDEX’s long-term Liquidity Provider, the rDEX Liquidity Farming Module will set up different Bonded Liquidity Gauges, with each Gauge corresponding to a different amount of the total FIS mining reward pool. The longer the locked-in Gauge corresponds to higher FIS, the higher the total reward.
Bonded Liquidity Gauges of rDEX in the Spring Program are set as follows:
1.No-lock period, with a total FIS award weight of 1 assigned by Gauge.
2.Lock-in period of 30 Days with a Gauge-assigned FIS total award weight of 1.2.
3.Lock-in period of 60 Days with a Gauge-assigned FIS total award weight of 1.5.
4.Lock-in period of 90 Days with a Gauge-assigned FIS total award weight of 1.8.
This means that with the same amount of participating liquidity funds, the APY return from participating in the 90-day lock-in mining plan will be 80% higher than that without the lock-in period.
Users can freely choose to lock LP tokens into different Gauges by different ratios. For example, if Alice gets a total of 50 rATOM-FIS LP tokens, she can choose to deposit 15 rATOM-FIS LP tokens into the Gauge with a 30-day lock-up period and another 35 rATOM-FIS LP tokens into the Gauge with a 60-day lock-up period. In this way, Alice has access to a combination of LP proceeds for diversified fund management needs.
When the user chooses to lock the LP token, redemptions can only be initiated when the lockout period is due. For example, if a lockout period of 30 days is selected, redemptions can only be initiated when the LP token lockout period is greater than 30 days. After 30 days, users can also choose not to redeem and continue to participate in mining. Their APY earnings will remain intact.
Claim Rewards
When the user locks the LP token to the rDEX Bonded Liquidity Gauge, s/he will receive an automatic real-time FIS reward from the rDEX contract, which has no lock-in period and can be claimed by the user at any time.
Impermanent Loss Protection
In most cases, long-term LPs will always earn more than the value of the initial liquidity provided, but LPs would also incur some losses that will make long-term LPs earn less than the value of the initial liquidity provided, i.e., an Impermanent Loss. To encourage long-term LPs, rDEX plans to create an rDEX Impermanent Loss Protection to compensate for the potential impermanent losses of long-term LPs.
The core mechanism is when an LP satisfies a certain lock-up period. If the liquidity value corresponding to its LP token is lower than its original deposited value, the loss it incurs will be compensated by the rDEX Impermanent Loss Protection Reserve. In this way, the risk of LPs incurring an Impermanent Loss can be greatly avoided.
However, during the Spring Program phase, when rDEX is still in the early stages of development, the price of rToken will be vulnerable to significant increases or decreases in liquidity. In such a scenario, the introduction of the Impermanent Loss Protection Reserve reward program may not only fail to achieve the original purpose we envisioned, but also encourage whales to manipulate the liquidity of rDEX to influence the price of rToken, and then obtain a large amount of rDEX Impermanent Loss Protection Reserve compensation.
Therefore, rDEX will compensate for the possible Impermanent Losses of LPs by increasing the total amount of rewards in the Liquidity Mining Program during the Spring Program phase. Subsequently, in the Summer Program and Autumn Program stages, when rDEX’s development has gradually matured, its mining incentive APY will tend to stabilize. With long-term belief in rDEX’s development of LP in the continued provision of liquidity, rDEX will launch the Impermanent Loss Protection Plan to compensate for any Impermanent loss that may occur.
Conclusion
StaFi Foundation will strive to build rDEX as an important part of the StaFi rToken Ecosystem, providing sufficient liquidity for all rTokens. StaFi will facilitate this goal through a long-term, benign and effective incentive program.
The future development of rDEX is full of possibilities, such as exploring rDEX deployment on StaFiHub to serve rTokens in the Cosmos ecosystem, as well as supporting rToken/Token trading pairs. Based on rDEX, initiatives such as IDO of rToken and Index Product issuance, can also be explored to better build the StaFi rToken ecosystem and create more value for rToken Holders.
References
1.rDEX Testnet:https://test-app.rdex.finance/
2.rDEX testing guide:https://docs.rdex.finance/welcome-to-rdex/rDEX-The%20AMM%20DEX%20for%20rTokens/the-testing-guide-for-rdex-on-testnet
3.rDEX Proposal:https://commonwealth.im/stafi/discussion/2776-rdex-v1-solutionan-amm-dex-for-rtokens
About StaFi
StaFi is the first DeFi protocol unlocking liquidity of staked assets. Users can stake PoS tokens through StaFi and receive rTokens in return, which are available for trading, while still earning staking rewards. rToken is a synthetic staking derivative issued by StaFi to users when users stake PoS tokens through StaFi rToken App . rTokens are anchored to the PoS tokens staked by users and the corresponding staking rewards. rTokens can be transferred and traded at any time.
